rvaidya: Economy is growing despite jholawalas and Wall Streeters--

aug 17th, 2010

this is the most spendthrift lot of politicians, feathering their nests like there's no tomorrow.

---------- Forwarded message ----------
From: Vaidyanathan R

 

http://www.dnaindia.com/print710.php?cid=1424372

Why economy is growing despite jholawalas and Wall Streeters

DNA / R Vaidyanathan / Tuesday, August 17, 2010 0:16 IST

The economic policies of UPA-2 are afflicted by a condition called multiple personality disorder. The diagnosis requires that at least two personalities routinely take control of the behaviour of a person with an associated memory loss that goes beyond normal forgetfulness. The economics of UPA-2 is caught in a pincer attack between jholawalas and Wall Streeters. The uber economic ministry — the unaccountable National Advisory Council — is flooded with jholawalas whose idea is that the state should spend till it bleeds. And still spend after that.

Programmes like the National Rural Employment Guarantee Act (NREGA), Sarva Shiksha Abhiyan, and the mid-day meal scheme are implemented through parallel channels of public-private partnership along with NGOs and panchayati raj institutions. The Centre transfers assistance directly to state and district-level autonomous bodies, and these transfers are outside state budgets. And such accounts remain unaudited and mostly unaccounted for. The Comptroller and Auditor General (CAG) has revealed that Rs83,000 crore of taxpayer money spent in 2008-2009 remains to be audited.

Herein comes the bonanza for the jholawalas. In the name of "inclusive growth", a loot of government funds has been begun by NGOs who claim to represent civil society. Expenditure on welfare schemes is skyrocketing, but not accountability. For instance, the latest estimates are: ministry of rural development (Rs58,732 crore), ministry of HRD (Rs12,727 crores), ministry of health and family welfare (Rs7,468 crore), and ministry of agriculture (Rs3,191 crore).

The jewel is the rural development ministry's NREGA, named after Mahatma Gandhi. When there are nearly 500 schemes named after Indira and Rajiv Gandhi, this also could have been named after them instead of involving that poor old man. This is the tyranny of the unelected and the unelectable. These NGOs have also become "unaccountable". The traditional model is that children are taken care of by their parents and, later, parents are taken care of by the children. The new model is that both children and the old will be taken care of by the government.

The jholawalas want to create a society of entitlements wherein there are only rights and no duties. Unfortunately, many of them come from dysfunctional families and don't know the role of family and community in our system. They depend significantly on foreign sources of funds but now have found a milch cow in the "inclusive" economic policies of this government. They are not institutional builders or value adders. The Jholawala Emeritus is Amartya Sen, who says no timeframe should be set for starting the Nalanda University of which he is in charge.

On the other side, the government is pushed by the Wall Streeters, whose claim to fame is crony capitalism. In their scheme of things, we need foreign capital for everything. The only bhajan chanted by the Wall Streeters is FDI and FII. They think this will solve all the ills of our economy. When small businesses cry for credit, the Wall Streeters say we offer credit derivative swaps. (The logic: if you don't have bread, eat cake). Recently, the crony capitalists have proposed that business houses can own and run banks. The reason is inclusive growth. The jholawalas pretend to take care of the bottom 20% and the Wall Streeters the top 10%. What about the middle 70%? They are our growth story.

The good news is that we are growing in spite of these two albatrosses. The fastest growing sector is services. For instance, between 2004-05 and 2008-09, the service sector (with a 60% share in GDP) has grown at the real rate of more than 9%. The largest components are trade (9.42%), hotels and restaurants (9.88%), non-railway transport (7.8 %) and other activities like plumbing/painting, et al (9.7%). Even "unorganised" manufacturing has grown at 7.7%. These sectors have grown due to domestic household savings and not due to government policies or FDI. And all of them are predominantly partnership and proprietary family-owned firms. They get little credit from banks and government employees extort bribes from them. These are the sectors which are eyed by global predators since they are the fastest growing areas. Interestingly, they are supposed to be the traditional base of the main opposition party, the BJP. But I think they are neither aware of their base nor its growth.

The economic experts (figuratively speaking), torn between Aruna Roy and Montek Ahluwalia, are mouthing the clichés of the 1970s while the world has moved far away from those illusions. Both jholawalas and crony capitalists have found that this government is a kamadhenu — which can be milked to the limit. The most productive, hard-working segments carry on the growth story unsung. The ultimate irony is that UPA-2 is headed by an economist and advised by many economic experts.

The writer is professor at IIM-Bangalore The views expressed here are personal.

URL of the article: http://www.dnaindia.com/opinion/main-article_why-economy-is-growing-despite-jholawalas-and-wall-streeters_1424372

Permission to reprint or copy this article or photo must be obtained from www.3dsyndication.com

 

 

_______________________________________

R.VAIDYANATHAN                                                         

PROFESSOR OF FINANCE                                             

INDIAN INSTITUTE OF MANAGEMENT  

BANNERGHATTA ROAD

BANGALORE

INDIA_560076